Evolutionary Efficiency and Happiness

Luis Rayo and Gary Becker

Journal of Political Economy, 2007, vol. 115, issue 2, 302-337

Abstract: We model happiness as a measurement tool used to rank alternative actions. Evolution favors a happiness function that measures the individual’s success in relative terms. The optimal function is based on a time-varying reference point—or performance benchmark—that is updated over time in a statistically optimal way in order to match the individual’s potential. Habits and peer comparisons arise as special cases of such an updating process. This updating also results in a volatile level of happiness that continuously reverts to its long-term mean. Throughout, we draw a parallel with a problem of optimal incentives, which allows us to apply statistical insights from agency theory to the study of happiness.

Date: 2007
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Citations: View citations in EconPapers (212)

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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:115:y:2007:p:302-337

DOI: 10.1086/516737

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